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Types Of Business And What Form You Should Choose For Your Startup

| Published on October 26, 2018

Choosing the form of business is as important as the basic idea of business. You should decide the form of your business as per your needs and what works the best for you. Mentioned below are the different forms of businesses:


One of the most common forms of business, in this form a single individual is responsible for the entire business. The ownership of the business lies in the hands of one person and he controls and manages it fully. For those who want to have full control over their business finances, this model works the best.

Types Of Business And What Form You Should Choose For Your Startup

One may hire employees for day-to-day operations and specific needs, but the key decision making remains with the business owner. In this case, usually, the profit and loss are between that single person unless he has taken investment from some third party. And in such scenarios, if the business incurs a loss, the individual is liable to pay back the creditor from his savings and personal assets. This is one of the easiest types to form, and requires the least amount of documentation and is inexpensive.

Also Read: What Is A Cockroach Startup & How It Is Different From Unicorn Startups

Partnership Firm

The partnership is the second most common form of business alliance. This is where two or more people agree to form a business together and also agree to share the profits and losses of the company. This is also easy to form and individuals can decide on their roles, shares and other aspects of work.

Types Of Business And What Form You Should Choose For Your Startup

In case of winding up or dissolving the company, each partner is liable to pay back debts if any. The properties and private assets of individual partners can be used to recover debts according to the proportion of their shareholding. Without the consent of all other partners, a partner cannot transfer his shares in the firm to any other person except the existing partners

Private Limited Company (PLC)

PLC is an association of people to run in a business together, which is voluntary in nature. This form of business is suitable if there is a large amount of fund required to set up the business.

Types Of Business And What Form You Should Choose For Your Startup

Under PLC each member has a limited liability. A PLC can have up to 200 members as compared to 100 in a partnership firm. The shares allotted to each member cannot be freely transferred and thus it is best suited to those who prefer to restrict their liability but want control over the business with a limited circle and maintain the privacy.

Limited Liability Partnership (LLP)

A relatively newer form of business type, LLP offers the flexibility of a partnership and also limits the liability of its partners to the extent of capital involved in the business. Governed by provisions of the Limited Liability Partnership Act 2008, the partners of LLP are free to manage the business on the basis of mutually agreed terms.

There are other business forms also, like the Hindu Undivided Family, Public Limited Company and Co-Operative Society, but these business forms have their own set of restrictions and are not open to everyone.

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